Binay on ASEAN integration: Growth meaningless if it benefits only the rich

MANILA, Philippines – Vice President Jejomar C. Binay said on Monday, September 28, that inclusive growth is the most important goal of the Association of Southeast Asian Nations (ASEAN) economic integration, whose process will start in December.

In his speech at the 2nd ASEAN Fixed Income Summit (AFIS), Binay said, "I believe growth is meaningless if it does not redound to the good of everyone, or at least, to the greater number." (READ: VP Binay: Where is inclusive growth?)

He added that integration would be meaningless if it can only make the rich richer and not uplift the lives of the majority.

Binay pointed out that despite the recent economic developments brought by the planned ASEAN integration, significant portions of the population of the region's countries remain poor.

"The reality is that emerging economies like ASEAN have a significant portion of the population living below the poverty threshold. In the Philippines, one-fourth of our population is considered poor. About half of ASEAN has about the same poverty ratios as ours," Binay said.

Level the production base

The Vice President added that inclusive growth matters most to poor people.

"They stand to become poorer if they have no access to basic opportunities that middle- and high-income earners take for granted, like easy transportation, education, or healthcare. To the poor, these are lifelines that help them improve their lives," he added.

So if ASEAN economies must strive toward becoming one market, they should first work to level the production base.

“The primary step for this is to make growth equitable," the Vice President said.

Thus, Binay told those present at AFIS that they could try to convince corporate bonds issuers to invest in basic physical infrastructure and services.

He added that investments in physical infrastructure have high potential. An Asian Development Bank (ADB) report said ASEAN has to invest at least $60 billion annually for 5 years for the region to have decent infrastructure.

Binay pointed out that for the Philippines alone, $65 billion investment within 15 years is needed to address the traffic problem in Metro Manila, according to a Japan International Cooperation Agency study.

“The current infrastructure-to-GDP (gross domestic product) ratio in ASEAN averages around 5% – more advanced economies like Singapore and Malaysia have invested higher than this average,” Binay said.

The opposition standard-bearer said the country only invested 2% of GDP on infrastructure and managed to grow by 6.2% only in 2014.

Binay, who chaired the Housing and Urban Development Coordinating Council (HUDCC), also noted that investing in low-cost housing can be profitable. 

“In the Philippines, there are agencies lending directly to underserved markets while some other financing institutions issue securities backed by mortgages from commercial banks,” he said.

Binay said that in his time as HUDCC chairman, "we built almost 216,000 mostly low-cost housing units, within 4 years and raised the assets of the Home Development Mutual Fund (Pag-IBIG) to over P376 billion ($8.04 billion) without increasing members’ contributions."

In an interview with ANC's Tina Monzon-Palma, President Benigno Aquino III said that he could not identify any allegation of corruption lodged against the opposition leader in the 5 years he was HUDCC chairman. (READ: Aquino: No corruption claims when Binay was housing czar)

The Vice President said in his AFIS speech that the education and healthcare sectors also offer bright prospects for investors in ASEAN.

“The Philippine government offers scholarships and student loans to encourage students to remain in school, although there is still room for corporate financing in Philippine education, whether by establishing schools or student loan schemes,” Binay noted.

He added that, for healthcare, privately-funded health insurance has been booming in the Philippines and directly competing with government’s Philippine Health Insurance Corporation (Philhealth). However, large areas are underserved due to the dearth of hospitals and rural health clinics.

Mandatory reforms required

Binay also stressed the need to support and empower micro, small, and medium enterprises by giving them better access to capital. (READ: DTI: Growth not inclusive without MSMEs)

“The ASEAN declaration’s blueprint took special cognizance of the need to grow our respective [M]SMEs for them to support economic growth. With proper management and some assistance on financial education, I believe investment in [M]SME development is worth the risk,” he said.

Binay, however, acknowledged the concern of making investments in infrastructure attractive to cross-border financing, as there is still a misconception that service-oriented projects are unprofitable.

“The challenge lies in convincing financiers that they can turn in a steady profit while helping countries build projects that result in inclusive growth. Public information campaigns on profitable service projects financed by corporate bonds can be spearheaded by AFIS,” he said.

Binay also recognized that ASEAN countries are of different economic levels as they vary in the levels of preparedness in infrastructure, laws, and practices, and these must be synchronized before they can integrate the financial systems.

“To achieve a fairly homogenous level of development in ASEAN’s financial markets, implementors must skirt around or amend protectionist restrictions that vary from country to country,” Binay said.

Thus, mandatory reform will be difficult to implement across ASEAN because the economies, being so diverse, have varying regulatory frameworks.

"At this point and with a deadline looming before the AFIS, the most acceptable step toward harmonization would be to adopt best practices while each country adjusts its financial system,” he added.

Toward integrated ASEAN

Thus, effective governance and political will are neeed for the ASEAN integrated development.

“An investor’s choice is guided not only by profitability but also by a country’s business environment. Regardless of whether the region’s financial system is fully integrated or not, an investor would demand a high degree of accountability, transparency, predictability. and reliability from the policymakers of his country of choice,” he said. (READ: Binay: PH needs CEO-style leadership)

Binay also stressed that ASEAN leaders should possess political will to ensure the success of the economic integration. 

“It is the political will of every leader that will effect the necessary adjustments to synchronize the country’s infrastructure, systems, and laws with the goals of ASEAN. It is political will that enables each country to honor its commitments toward the transformation of the region into a one united ASEAN,” he said.

Thus, "there is no substitute for a leadership with a strong political will to establish a fair, transparent, accountable and predictable regime that endeavors to benefit not just a few but all of his people,” Binay said. –